Unite Group announced £300-400 million in planned disposals for 2026 at expected yields of 5.5-6%, responding to margin pressure from reduced university nomination agreements. The student accommodation REIT faces a 1,000-2,000 bed reduction in university-nominated inventory for 2026, down from previous levels.
Current bookings stand at 68% of capacity, trailing typical sales pace as universities cut back nomination commitments. Rental growth for new bookings reached 2.4% on a revenue per occupied room (RevPOR) basis, landing at the lower bound of the company's 2-3% guidance range.
Unite Group set 2026 adjusted earnings per share guidance at 41.5-43 pence while holding its dividend flat year-over-year. The disposal program aims to recycle capital from lower-yielding assets into properties with stronger pricing power.
Management increased high-tariff bed exposure to 67% of the portfolio, targeting 80% medium-term. High-tariff properties command premium rents in tight supply markets near major universities. The portfolio rebalancing strategy addresses margin compression from the shift in university procurement patterns.
Nomination beds historically provided stable occupancy through bulk agreements with universities guaranteeing room blocks. The pullback in these commitments forces REITs to rely more on direct-to-student marketing, increasing operational costs and vacancy risk during slower booking periods.
The disposal program's 5.5-6% yield target suggests Unite is selling older or secondary market assets to fund acquisitions in core locations. Capital recycling at this scale represents roughly 8-10% of Unite's £4 billion-plus portfolio value based on recent valuations.
Student housing REITs face diverging performance based on nomination bed exposure and geographic concentration. Properties with high direct-let ratios in supply-constrained markets show more pricing flexibility than those dependent on institutional booking agreements.
Unite's margin compression coincides with broader UK higher education enrollment uncertainty amid visa policy changes and demographic shifts. The sector's ability to maintain rental growth while absorbing lower nomination volumes will determine valuation multiples through the current cycle.